OTTAWA
- Ottawa is closing a lucrative tax loop hole for companies and
executives who receive stock options that will bring in an extra $270
million for government coffers in the upcoming fiscal year.

"The
proposed measure will also help preserve symmetry in the tax treatment
of stock-based compensation," according to the budget Thursday.

"That
is, where preferential tax treatment is provided to the employee on
stock-based benefits, the employer is generally not allowed a tax
deduction for the cost of such benefits."

The amount of tax
revenue generated by the change is expected to increase to $300 million
in the 2011-12 and to $320 million in 2012-13.

Under the current
tax rules, an employee can cash out their options for a payment from
their company and be eligible for a stock option deduction, while the
payment is also fully deductible for the company.

The change which will go into effect immediately will allow only one
or the other - the employee or the company - to be eligible for the
deduction.

The government said the change brings Canada in line
with the tax rules in the United States. Those rules allow companies to
make a deduction for stock option plan cash pay outs, but do not allow
employees the deduction.

Jason Safar of PricewaterhouseCooopers
said if a company isn't making a profit, it will likely allow the
employee to make the deduction, but the decision becomes more difficult
for profitable companies.

Companies making money and paying taxes may want to keep the deduction for themselves.

"What it will mean though is that they
just cut their executives' compensation by some amount as far as their
executives are concerned," Safar